NEW YORK -- After years of being the "it" spirit in the United States, vodka is slowing down. For the first time since the clear spirit took the sales crown in 2007, whiskey is projected to pass it this year, and widen the gap for years to come, according to a Quartz report.
And whiskey's growth doesn’t appear to be a passing trend, but a serious and long-term shift in American consumer preferences.
Vodka is still the volume king, meaning that more gallons of the stuff get sold every year, and that will continue some time at least. But in dollar value, whiskey has made a big comeback, expecting to pass $20 billion in sales in the next three years, according to Euromonitor data.
In U.S. convenience stores, vodkas account for six of the top 20 best-selling spirits, while seven whiskey brands are in the top 20. Click here to see recent data.
In recent years, new flavored vodkas have rolled off manufacturers' shelves on an almost weekly basis. Today, whiskeys are getting a similar treatment, led by Fireball cinnamon-flavored whiskey, which grew 613% in volume sales during the 52 weeks ending Aug. 10, 2014, according to IRI. Analysts expect more of the same in the future.
A recent Credit Suisse analyst note calls the shift away from vodka and toward whiskey a “generational rejection,” according to Quartz. American consumers, it says, increasingly want something with “authenticity, heritage and taste.” Vodka doesn’t provide that, and big-brand, ultra-sweet, flavored vodka least of all.
Don Julio, Bushmills Swap
In other spirits news, Diageo PLC is swapping whiskey for tequila.
The British drinks giant said Monday it has entered into an agreement with Jose Cuervo, owned by the Beckmann family of Mexico, to take full control of tequila brand Don Julio, according to a Wall Street Journal report. In return, Diageo will sell Irish whiskey label Bushmills to the Mexican company.
The asset-swap will result in a net payment of $408 million to Diageo, which it will use to pay down debt.
The deal is Diageo’s third push into tequila this year following agreements to buy DeLeón—in a joint venture with the rapper Sean Combs —and Peligroso.
In return for the 50% of Don Julio it doesn’t already own, Diageo will lose Bushmills, which it acquired from Pernod Ricard SA in 2005. First distilled in Ireland in 1608, Bushmills is the No. 2 Irish whiskey brand by sales in North America, after Pernod’s Jameson.
But Diageo said the potential for growth in tequila, a still-nascent category with limited sales outside the United States and Mexico, outweighed the established global appeal of Irish whiskey.
“We don’t see it as we’re losing anything” by selling Bushmills, said Deirdre Mahlan, Diageo’s chief financial officer.
Diageo’s decision to ditch Bushmills is part of a broader shift upscale by the world’s biggest liquor maker, which also owns Johnnie Walker Scotch whisky and Smirnoff vodka. Don Julio sells for around $70 a bottle at entry level.
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